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Calm before the storm: Physicians gear up for rowdy RBRVS debate

HCFA to drop practice expense bombshell soon

Don’t expect a tranquil summer in the realm of Medicare. While seniors have a full range of Medicare issues to confront, physicians are strongly focused on a specific issue for the second half of 1997: practice expenses.

As esoteric as it may sound to the public, the issue of practice expense payments in the Medicare Part B formula known as the Resource-Based Relative Value Scale (RBRVS) is as important to physicians as any other Medicare issue they’ve faced in the past decade. Physicians interviewed by Physician’s Payment Update are promising a heated fight once the figures are released.

Consider this headline from a recent newsletter of the American College of Cardiology (ACC) in Bethesda: "HCFA may cut $1 billion from CV [cardiovascular] specialists by January 1998." Here’s another one, from the Chicago-based AMA’s Internet home page: "Blueprint for battle: Focus turns to Medicare practice-expense issue." Physicians are suddenly interested again in the details of how RBRVS actually works  and how it might change.

RBRVS is Medicare’s payment schedule for physicians. Its three components are physician work (54%), practice expenses (41%), and malpractice costs (5%). The issue exploded earlier this year when HCFA released preliminary data to medical societies on plans to revamp RBRVS’ practice expense component. (See related story in PPU, April 1997, pp. 49-52.) At that time, HCFA officials predicted release of an official proposal, called a notice of proposed rule making, in the May 1 Federal Register. By PPU press time in late April, however, most physician groups were predicting actual release no earlier than mid-May. A HCFA spokesperson was hesitant to predict an expected release date, but the official agreed that May 1 was unlikely.

But until HCFA releases the notice, physician groups essentially are in a holding pattern. "We’re waiting to see what the proposed rule contains," says Paul Bonta, an ACC policy analyst. "There’s not a lot we can do until the notice comes out." Bonta surmises that the proposal is in the clearance stages, and says that process can be time-consuming.

For cardiology alone, the impact of this proposal could be massive. For example, according to HCFA’s initial analysis, cardiology services were estimated to be cut by 20% to 25%, and cardiac surgical procedures were to be cut by 32% to 44%.

Wilensky favors implementation of the resource-based practice expense formula, despite many physician groups’ arguments to hold off until more data are gathered.

Also, she says the cuts should have been foreseen, given that the practice expense portion of RBRVS originally was not resource-based. RBRVS was launched with "flawed, charge-based practice expense values," Wilensky says. Converting practice expenses to actual costs, and placing those costs on a relative value scale, is fairer, she says. Nor will it be the problematic mathematical task that many physicians make it out to be, she argues.

"Enough is known about the direction and magnitude of changing to a resource-based method that it makes sense to proceed," Wilensky said in testimony before the U.S. Senate Finance Committee.

To soften the blow of these cuts, phase them in, Wilensky suggests. "With regard to concerns that some physicians will experience more extreme payment reductions than they had anticipated, the commission has long maintained that new values be phased in over three years, rather than all at once as required by current law," Wilensky told the committee. "This is because substantial changes in payment for individual services risk significant disruption if implemented in a single step." Conceivably, even a phase-in would not soften the blow that much.

Physicians’ outraged reaction to these proposed cuts is ironic given their strong requests for practice expense formulas based on historic data. Now that HCFA’s proposal to revamp the practice expense component looks like it will fall short of physician expectations of higher reimbursement, some physicians are questioning HCFA’s methodology.

Identifying likely practice expense trends

Experts interviewed by PPU won’t predict what HCFA’s actual proposal will look like. Looking at history might help, however. Implementation of RBRVS increased payments for primary care and reduced payments to specialists, much as early predictions foretold. But that intended effect on Medicare payments was reversed through an extra RBRVS adjustment factor called Medicare Volume Performance Standard (MVPS).

Each year, HCFA estimates the appropriate level of growth in Medicare service volume and establishes that estimated growth level as a target. That targeted growth level is the MVPS. Separate growth targets are established for primary care, specialist services, and other services. Physicians who exceed the targeted growth rate are penalized, while those who fall under it are rewarded. Surgeons have been rewarded under the MVPS because their service volumes are falling consistently these days, which makes it easier for them to make their targets. Primary care physicians, whose services are more in demand than ever, have taken hits from the MVPS.

Most private payers have not adopted the MVPS, but instead the basic weights of RBRVS, which did create a significant shift in payment from specialists toward primary care. This has led to discounted fee for service and capitated payment agreements in many managed care arrangements.

Here are some overall trends of the original practice expense proposal, as described by ACC policy experts:

• Groups that gain under HCFA’s initial options are family practitioners, a few specialties such as dermatology and rheumatology, and nonphysician practitioners such as chiropractors and podiatrists.

• Losers would include internal medicine subspecialties such as gastroenterology, pulmonology, and nephrology, as well as surgical specialties such as thoracic and neurosurgery.

• Internists, who led the push for a resource-based practice expense component to revamp evaluation and management (E/M) codes, were expecting significant increases. Instead, E/M code changes so far amount to only 1% to 4% in gains.

• Academic physicians in general are expected to experience major cuts based on proposed reductions in payments for hospital-based services. HCFA is assuming that direct practice expenses  those attributable to a specific service  account for 55% of practice expense relative value units. The greater the direct practice expense percentage, the greater the loss when a service is performed out of the office.

In its original proposal, HCFA outlines broad impacts on specialties. ACC has broken down the broader categories to show impacts on high-volume cardiology services. "The biggest surprises for cardiology include the reductions in payments for echocardiography, exercise stress testing, and hospital visits and consultations," says a recent ACC text, Medicare Practice Expense Information: March 1997.

[Editor’s note: PPU will keep readers apprised of breaking news in this area through free fax bulletins. Please fill out the form inserted in this newsletter to make sure we have your fax number. Or call our customer service department at (800) 688-2421.]

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